OT:RR:CTF:VS H312560 JMV
Thomas E. Woestendiek
Trans American CHB Inc.
4902 North America Drive
Williamsville, NY 14221
RE: Preferential Tariff Treatment of PVC under the USMCA
Dear Mr. Woestendiek,
This is in response to your request dated July 4, 2020, on behalf of your client, Nexans Canada, Inc. (“Nexans”), in which you request a ruling, pursuant to 19 C.F.R. Part 177, regarding the preferential tariff treatment of Polyvinyl Chloride(“PVC”) – Plasticized compound under the United States-Mexico-Canada Agreement (“USMCA”). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for a response. Our ruling is set forth below.
You have asked that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in this ruling or in the attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
Nexans is an international cable and fiber optic company that will be producing PVC compounds at its facility in Ontario, Canada. Nexans submits that the compound at issue, PVC, is classified in subheading 3904.22.00 of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for Polymers of vinyl chloride or of other halogenated olefins, in primary forms: Other poly(vinyl chloride): Plasticized.
The PVC compound that Nexans produces must possess certain properties such as tensile and elongation, insulation resistance, oil resistance, crush resistance, and impact resistance. Nexans states that these properties cannot be met by any one of the individual components. However, the PVC compound created through Nexans’ proprietary material development and compounding practices does meet these performance requirements.
The first step in the production process of the PVC compound is the precise and deliberate batch weighing of all component materials. Each component of the formula is selected for its unique contribution to the performance of the final product, and no diluents are used. The formula consists of bulk dry components, additive dry components, and liquid plasticizers. The scales used in this step of the process have a readability of 0.05 kg, 0.02 kg, and 0.05 kg respectively, and may weigh components within 2 percent of the value defined in the formulation.
The materials are then transferred to an intensive mixer, which primarily functions to allow plasticizer absorption into the PVC Resin, and uniform dispersion of all components within the batch. No diluents are used. The end product possesses essential physical and chemical characteristics necessary for its end use, and which are necessarily different from the input materials.
Nexins’ PVC compound formulations are tightly controlled. The formulations require approval from the Director of Engineering and Applications and are not modified during production. Additionally, during the first step of production when the ingredients are weighed, all scale values are recorded electronically and stored for at least one year for review to ensure compliance and allow traceability. If a component is significantly over- or under-weighed, the batch is either dispositioned or scrapped.
You provided us with two example formulas, and described the purpose of each component ingredient. The first formula is for Compound 1420, which is a proprietary insulation compound listed as an authorized component in construction of cables. It consists of:
[XXXXXX], which serves as the PVC base resin,
[XXXXXX], which serves as an electrical grade plasticizer,
[XXXXXX], which serves as an electrical grade plasticizer,
[XXXXXX], which serves as a functional filler,
[XXXXXX], which serves as a volume resistivity additive,
[XXXXXX], which serves as a stabilizer to aid processing and permit long term retention of physical properties, and
[XXXXXX], which serves as a flame retardant.
The second formula is for Compound 7589, which is a proprietary jacket compound listed as an authorized component in construction of cables. It consists of:
[XXXXXX], which serves as the PVC base resin,
[XXXXXX], which serves as an electrical grade plasticizer,
[XXXXXX], which serves as a functional filler,
[XXXXXX], which serves as a stabilizer to aid processing and permit long term retention of physical properties, and
[XXXXXX], which serves as a flame retardant.
ISSUE:
Whether the PVC compound classified under subheading 3904.22.00, HTSUS, imported into the United States from Canada, is eligible for duty-free treatment under the United States-Mexico-Canada Agreement.
LAW AND ANALYSIS:
The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
As noted above, GN 11(b)(iii) indicates that a good may be considered an originating good of a USMCA country, if the good satisfies all applicable requirements set forth in GN 11. Nexans suggests that the PVC compound qualifies as an originating good of a USMCA country in accordance with the terms of GN 11(n)(v)(D), which states that
A good of chapter 39 is an originating good if the deliberate and proportionally-controlled mixing or blending (including dispersing) of materials, other than the addition of diluents, to conform to predetermined specifications occurs in the territory of one or more of the USMCA countries, resulting in the production of a good having essential physical or chemical characteristics that are relevant to the purposes or uses of the good and are different from the input materials.
As previously noted, the PVC compound is classified under subheading 3904.22.00, HTSUS, which falls under chapter 39, and therefore may qualify as originating under this rule.
The subject PVC compound is produced through precise and deliberate mixing of ingredients that conform to predetermined proportions. According to Nexans’ submission, each ingredient is added in exact amounts, according to a formula that is not deviated from during production. Nexans also outlined steps that are taken to ensure that these proportions are met, such as electronic storage of production records and disposal of product that does not meet the required proportion of mixed ingredients.
Additionally, the mixing and blending of the component materials results in a finished product with new physical characteristics that are different from the input materials. The PVC compounds are formulated to meet the predetermined specifications to achieve various properties, such as crush and impact resistance. Any one of the individual component materials cannot meet these specifications.
Based on the information outlined above, we find that the finished product meets the definition of an originating good of a USMCA country in accordance with General Note 11(n)(v)(D). As a result, the PVC compound produced in Canada will qualify for preferential tariff treatment under the USMCA.
HOLDING:
Based on the information provided, the PVC compound classified under subheading 3904.22.00, HTSUS, is eligible for preferential tariff treatment under the USMCA.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch